INSURER BILL FORGOES HIKES

By Zac ANDERSON

Published: Friday, May 3, 2013 at 1:00 a.m.

Last Modified: Thursday, May 2, 2013 at 10:26 p.m.

TALLAHASSEE - Insurance agents will have more work to do and many policyholders will be kicked out of state-run Citizens Property Insurance -- testing the solvency of a shaky private market -- but controversial rate increases were dropped from the final property insurance bill that cleared the Legislature Thursday.

Facts

"There were so many problems I needed to rely on Herb for.He became a mentor, then a friend, then a father figure."

– Victor Michel, a student in the Manatee Take Stock in Children program

The Senate backed away from more aggressive reforms that would have significantly raised rates for new Citizens customers. Senators agreed to a softer approach advocated by House leaders worried about rate shock in crafting a package that would pass muster with Gov. Rick Scott, who also has expressed concerns about rates.

"Call it Citizens (reform) lite," said Sen. David Simmons, R-Altamonte Springs, who reluctantly agreed to go along with the House changes to his bill.

While Citizens' rates will not rise for new customers beyond the current 10 percent annual increase allowed by law, the legislation could still lead to a major reshuffling of Florida's property insurance market.

Many existing customers will be forced out of Citizens; new customers will be steered toward the private market more aggressively.

Lawmakers also agreed to create a clearinghouse program that forces agents to shop policies around in the private market.

Agents currently can place clients with Citizens if the private insurers an agent represents do not offer rates within 15 percent of the state-run company's.

But many agents only represent a fraction of the state's property insurers. Under the clearinghouse system, agents must seek quotes from every private insurer offering coverage in a given region before placing a policy in Citizens. Renewal policies also will be entered into the clearinghouse.

The legislation requires existing Citizens customers to leave if a private insurer offers an equal or lower rate. One analysis estimated more than 200,000 current Citizens customers can find cheaper rates in the private market.

With large national insurers such as State Farm and Allstate continuing to drop customers in Florida and restricting new business, shifting policies out of Citizens makes homeowners and the real estate industry more dependent on a raft of Florida-based insurance start-ups.

Many of these have not been tested by a major hurricane, retain much less surplus than standard carriers, and are poorly rated by independent financial analysts.

At least eight Florida property insurers -- 11 when considering multiple insurers operating under one holding company -- have failed since 2004. Other weak companies were purchased or merged before going broke.

Insurance policyholders across Florida will pay a 1 percent assessment this year to cover the claims of failed Tampa-based Homewise Insurance.

Citizens -- Florida's largest property insurer with more than 1.2 million policies, including 90,000 in Sarasota and Manatee counties -- is also levying a 1 percent assessment to help pay claims from the 2004-05 storm season.

But with $6 billion in reserves, Citizens' finances are much improved. It can now withstand all but the most catastrophic storm without resorting to assessments.

Yet many lawmakers argue that the state-run company is still a major financial liability. Creating a vibrant private market should be a priority, they say.

Simmons continued to rail against Citizens Thursday for charging rates below what private insurers offer in some areas, but described the House legislation as "a win."

"This is a significant advancement with respect to Citizens reform," he said.

Most lawmakers were happy to go along with reforms that did not raise rates.

The bill passed the Senate 32-1 Thursday. Sen. Eleanor Sobel, D-Hollywood, was one of 15 senators voting against the original Senate bill.

"The bill we have today is a very good bill," Sobel said before switching her vote.

<p><em>TALLAHASSEE</em> - Insurance agents will have more work to do and many policyholders will be kicked out of state-run Citizens Property Insurance -- testing the solvency of a shaky private market -- but controversial rate increases were dropped from the final property insurance bill that cleared the Legislature Thursday.</p><p>The Senate backed away from more aggressive reforms that would have significantly raised rates for new Citizens customers. Senators agreed to a softer approach advocated by House leaders worried about rate shock in crafting a package that would pass muster with Gov. Rick Scott, who also has expressed concerns about rates.</p><p>"Call it Citizens (reform) lite," said Sen. David Simmons, R-Altamonte Springs, who reluctantly agreed to go along with the House changes to his bill.</p><p>While Citizens' rates will not rise for new customers beyond the current 10 percent annual increase allowed by law, the legislation could still lead to a major reshuffling of Florida's property insurance market.</p><p>Many existing customers will be forced out of Citizens; new customers will be steered toward the private market more aggressively.</p><p>Lawmakers also agreed to create a clearinghouse program that forces agents to shop policies around in the private market.</p><p>Agents currently can place clients with Citizens if the private insurers an agent represents do not offer rates within 15 percent of the state-run company's.</p><p>But many agents only represent a fraction of the state's property insurers. Under the clearinghouse system, agents must seek quotes from every private insurer offering coverage in a given region before placing a policy in Citizens. Renewal policies also will be entered into the clearinghouse.</p><p>The legislation requires existing Citizens customers to leave if a private insurer offers an equal or lower rate. One analysis estimated more than 200,000 current Citizens customers can find cheaper rates in the private market.</p><p>With large national insurers such as State Farm and Allstate continuing to drop customers in Florida and restricting new business, shifting policies out of Citizens makes homeowners and the real estate industry more dependent on a raft of Florida-based insurance start-ups.</p><p>Many of these have not been tested by a major hurricane, retain much less surplus than standard carriers, and are poorly rated by independent financial analysts.</p><p>At least eight Florida property insurers -- 11 when considering multiple insurers operating under one holding company -- have failed since 2004. Other weak companies were purchased or merged before going broke.</p><p>Insurance policyholders across Florida will pay a 1 percent assessment this year to cover the claims of failed Tampa-based Homewise Insurance.</p><p>Citizens -- Florida's largest property insurer with more than 1.2 million policies, including 90,000 in Sarasota and Manatee counties -- is also levying a 1 percent assessment to help pay claims from the 2004-05 storm season.</p><p>But with $6 billion in reserves, Citizens' finances are much improved. It can now withstand all but the most catastrophic storm without resorting to assessments.</p><p>Yet many lawmakers argue that the state-run company is still a major financial liability. Creating a vibrant private market should be a priority, they say.</p><p>Simmons continued to rail against Citizens Thursday for charging rates below what private insurers offer in some areas, but described the House legislation as "a win."</p><p>"This is a significant advancement with respect to Citizens reform," he said.</p><p>Most lawmakers were happy to go along with reforms that did not raise rates.</p><p>The bill passed the Senate 32-1 Thursday. Sen. Eleanor Sobel, D-Hollywood, was one of 15 senators voting against the original Senate bill.</p><p>"The bill we have today is a very good bill," Sobel said before switching her vote.</p>